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This has been an action-packed year for the crypto industry. Bitcoin had a solid run. With its price rising by almost 70 percent, it took the market capitalisation of the crypto market to over $3 trillion briefly. Ethereum and a few other newly-launched altcoins also put up a good show with strong gains, even better than bitcoin in most cases.
Non-fungible tokens (NFTs) became increasingly accessible to retail investors and mainstream artists. metaverse, another part of the crypto world, gained much popularity. The year saw some record land deals in the metaverse. Facebook changed its name to meta and is now the torchbearer in building the virtual universe.
Investors are now eagerly looking forward to what the next year holds for the crypto market. 2022 is also expected to be an eventful year for the crypto market. The strong market trends that began in 2021 are likely to continue in the subsequent year; the crypto industry is also expected to see an increase in the number of market participants. Investors can expect to see the following trends in the crypto space in 2022:
Crypto regulations to be in focus
Regulators across the world spent 2021 assessing the impact of cryptocurrency on the economy. Central banks from many countries, including India, warned of risks to financial stability from cryptos. From El Salvador's adoption of bitcoin as a legal tender to China's ban on crypto-related activities to India's announcement of a crypto regulation bill soon including a ban on all private cryptocurrencies, the year 2021 saw a lot of regulatory action. The trend is expected to continue in 2022. It may also see the introduction of central bank digital currency (CBDC).
Institutional investments in crypto markets likely to rise
This year, the crypto industry has drawn huge investments from well-known companies and financial organisations. Investors including venture capital funds poured in about $30 billion into the industry in 2021, according to reports. The number of institutional investors present in the crypto market is likely to increase in the year 2022. With Microsoft and Facebook going big on the metaverse plans and big brands like Nike and Adidas making an entry into the space, the crypto space is likely to see many more investments in the coming year. The decentralised finance (DeFi) space is also expected to see a lot of activity. Banks too, have started to notice the power of cryptos and are looking to add support to the crypto market. Newer loan products backed by cryptocurrencies are being rolled out by big banks like Goldman Sachs.
Bitcoin likely to remain under pressure
Bitcoin is likely to end the year at a little under $50,000, but that is after making a fresh high of nearly $70,000 in November. It had started the year at around $29,000. After the massive gains clocked this, investors expect a bearish trend in the legacy cryptocurrency in the year 2022.
Carol Alexander, professor of finance at Sussex University, told CNBC she expects bitcoin to tank to as low as $10,000 in 2022, virtually wiping out all of its gains in the past year and a half. She believes bitcoin “has no fundamental value” and serves as more of a “toy” than an investment.
However, there are also experts who believe the bitcoin rally will soon resume, and this time, the crypto will easily crack the $100,000 mark.
NFT market growth likely to continue
NFTs have helped artists and creators get access to decentralised funding options. As a result, they get more freedom in financing their creation. Being based on blockchain technology, NFTs are quite secure and help to authenticate the ownership of the digital asset. Thanks to such benefits, NFTs are quite popular among artists and creators. Hence, the crypto market is expected to see an increase in the valuation of the NFT market.
Web 3.0 expected to enter the mainstream
Web 3.0, the third version of the internet, is in the works. In Web 3.0, people get to fund their website without depending on large corporations that own servers and charge hefty fees. There are many other advantages of Web 3.0 like being able to personalise the internet and avoiding the occurrence of a single point failure (a particular social website crashing, for example, will not affect your activities for the period). The increasing acceptance of Web 3.0 will have a positive impact on cryptocurrencies such as Ethereum, Livepeer, and Helium among many other cryptos that are linked to the third version of the internet.
Launch of first spot Bitcoin ETF likely
The ProShares’ Bitcoin Strategy exchange-traded fund (ETF) launched in the US in 2021 only provides access to bitcoin futures and not the cryptocurrency itself. However, it has proved expensive for retail investors. Vijay Ayyar, Vice President of corporate development and global expansion at crypto exchange Luno pointed out to CNBC, “The Bitcoin Futures ETF that launched this year has been widely regarded as not very retail-friendly given the high costs involved of rolling over contracts which amount to around 5-10 percent.”
Investors now hope to see the launch of the first-ever spot bitcoin ETF that will provide direct access to the cryptocurrency.
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